With the new Responsible Lending Code having taken effect on June 6 under the oversight of the Commerce Commission, the New Zealand Federation of Family Budgeting Services has issued a voluntary Code of Responsible Borrowing as a counterpart.
The Federation says the borrowing code is for anyone thinking about taking out a loan or entering into a credit contract. It notes 82% of New Zealand families have debt of some kind, and collectively we spend more than we earn.
"This Code of Responsible Borrowing will help you avoid penalties, repossession, stress and heartache. It establishes minimum expectations for New Zealanders considering a loan or credit contract," the Federations says.
The Code advises borrowers to work out their budget because a responsible borrower is sure they can afford the repayments. It advises people to look at all their options because a responsible borrower considers whether there are other ways to meet their needs. It also says borrowers should find out more about what they're signing because a responsible borrower knows what they're signing. Additionally it advises borrowers to provide all the information the lender needs, and talk to their lender if unexpected life events make repayments difficult.
"Lenders have an obligation to lend responsibility. Lenders are regulated by the Credit Contracts and Consumer Finance Act and guided by the Code of Responsible Lending. Borrowers have an obligation to borrow responsibly. This Code of Responsible Borrowing sets out the expectations of responsible borrowers, completing the other half of the equation. It is voluntary, but sticking to this Code shows your commitment to borrowing responsibly," the Federation says.
The Code of Responsible Borrowing was produced in association with the Financial Services Federation, the lobby group for finance companies.